Wal-Mart’s entry into India

The size of few hundred millions being served by unorganized retail is a dream come true for any businessman, what to talk of Wal Mart, the World’s number 1 company!

The tie-up of Wal-Mart with Bharti as announced has already created shockwaves amongst the existing and emerging retail chains and retailers alike. The reason, Wal-Mart has a history of driving the mom and pop stores out of business every time they have opened a store and have also outgunned the competition from Kmart and other big time retailers in the US consistently.

The big question is ‘Can Wal-Mart replicate its US success in India?’ and there are valid arguments in support of the yehs and the nays.

First those in support of Wal-Mart.

a.  Given their huge exposure to retailing, supply chain automation and outsourcing agreements,  they would be in a better position compared to say Reliance who is just learning the ropes.  (Perhaps that is the reason for Reliance to look for partners overseas).

b.  The deep pockets of Wal-Mart  may help it manage rough weather for an initial couple of years which its opponents can ill-afford.

c.  There is a huge population of shoppers in India which is cost-conscious and  Wal-Mart might be in a vantage position to take advantage of this trend.

Those who are against, offer :

1.  Wal-Mart’s policy of paying low wages will run into rough weather with other guys like Pantaloon or Reliance poaching their well-trained staff not only from the stores but from the back end operations.  And if they really pay Industry level salaries, then they might not have the competitive edge.

2.  The concentration of the shoppers in the metro and cities in India runs counter to the situation in the US where Wal-Mart focusses on the suburbs or the rural markets.  So Wal-Mart will have to pay huge rentals in good locations in the metros and cities which will also have an impact on its cost structure.

3.  Unlike the US where there are only regional accents of English, operations in different parts of India would need people trained in local languages as well in addition to English and this might hit easy rollout of new stores in the pace that Wal-Mart has become well known for.

4.  Outsourcing from cost-effective sources like India and China may give the definite cost-advantage in a market like US but might not have much bearing in the Indian market.

Only time will tell whether Wal-Mart has joined the ranks of the MNCs that have bit the dust in India on account of either bloated expectations or lack of empathy or whether it will successfully add India to its global map.

Watch this space for more updates!


1 Comment

  1. manish joshi said,

    May 14, 2007 at 1:20 pm

    wat i feel about that wal mart will definately make huge profits and it will be having almost 30%if the market share in next few years .some places where it may have problems due to political reasons and oppose from retailors as it is said that” where ever wal mart goes it completely ruins the conditions of the farmers”

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